Daimler Made Smart Decision, Distributor Says

Smart saw a sudden increase in U.S. demand once the tiny Fortwo earned solid safety grades from the IIHS and NHTSA, Smart USA President Dave Schembri says.

CHICAGO – Three years ago, recalls Smart USA Distributor LLC President Dave Schembri, Daimler-Benz AG was toying with the idea of dropping the Smart brand.

“But they couldn’t be happier with us now,” he beams, noting Smart USA still has 30,000 folks on a waiting list who gladly paid $99 each to make a “reservation” a Fortwo coupe or convertible.

Schembri brought the Smart Fortwo to Chicago to update the Midwest Automotive Media Assn. on what’s gone on since it went on sale in January and what’s planned in the immediate future. Smart USA reported sales of 1,778 vehicles in September. To date, it has delivered 18,156 cars.

Schembri insists $4 a gallon gas hasn’t been the motivation for consumers to wait in line for up to a year to get a tiny 2-seater powered by a 71-hp 1.0L 3-cyl. engine rated at 33/41 mpg city/highway (7.1-5.7 L/100 km).

“We started taking $99 reservations and got most of the 30,000 on the waiting list before gas prices spiked at over $4 a gallon,” he says. “Actually, the biggest spike we experienced in getting reservations was when the Insurance Institute for Highway Safety gave our car a good rating for front and side impacts and acceptable for rear impacts, and the National Highway Traffic Safety Admin. gave us a 5-star crash rating (in side-impact safety).

“Before that, small-car safety had been a fear. When we got those ratings we had to add 10 phone lines to our 800 reservation phone number.”

Smart has no plans to expand the number of cars it gets for the U.S. market or to broaden its model offerings beyond the Fortwo 2-seater for now.

“The test is to sustain interest and excitement in the car over time,” Schembri says. “The Fortwo is what makes Smart unique, and we have no plans for more than 2-passenger cars. Because if we add more seats, we’d simply be like the other cars in the market.”

Smart is testing an electric vehicle in London that it expects to produce sometime in 2010, he acknowledges. And although it is destined for the U.S. market, Smart hasn’t determined where the car will go on sale first, Schembri says.

A mild-hybrid Smart developed in Europe stops at idle and then restarts. But it isn’t planned for the U.S. because the increase in mileage over the current Fortwo is negligible and doesn’t justify a premium price.

There are no plans to swell the allotment of cars available for the U.S. market, because history shows that when auto makers boost output to meet demand on a wildly popular new car, they often end up offering incentives or curtailing production when demand stabilizes, Schembri says.

“We can grow volume,” he says, but, “we always want to be one vehicle short” to ensure dealers can demand full sticker on each sale and profit on a small car with a razor thin margin.

Though Smart is in high demand and short supply, Smart USA Chairman Roger Penske has two of the cars and Schembri has one – though Schembri quickly and proudly notes that both paid full sticker.

“I have fun when I get calls from people asking if I can get them a deal on a car and I say, ‘Sure, I’ll get you one for what Roger and I paid,’” Schembri laughs.

He points out that while Smart has the smallest vehicle on the market that gets 33/41 mpg without a premium hybrid price tag, it surely will have rivals soon, with stricter corporate average fuel economy laws demanding auto makers hit fleet averages of 35 mpg (6.7 L/100 km) in 2020.

“Everyone will have small cars like this in three to four years, and that should make it exciting. My only fear is that not everyone will have a small car like this – because if they don’t, it would mean we guessed wrong.”

While focusing on high mileage, Schembri says there may be a high-performance model in the Fortwo coupe’s future.

“Brabus (North America Inc.), our aftermarket accessories supplier, may come up with a possible performance appearance package for the car.”

The ’09 Smart Fortwo will be in showrooms later this month with very little change from the ’08 model.

“The No.1 reason the engine warning light goes on in the dash is that someone didn’t tighten the gas cap,” Schembri says. “For ’09, we will have a light in the dash that tells you when the gas cap is loose.”

Pricing has not been announced, but Schembri says stickers probably will creep a little, although “we’re trying to stay close to the original price, at least at the introduction of the ’09s.”

It takes less than four hours to assemble a Smart Fortwo coupe, the lowest assembly time in the industry, he says.

“We hope someday buyers can visit the plant, see their car built, and drive it away in the same day,” Schembri says.